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article imageWhere the top 10 U.S. banks are investing in fintech

By Tim Sandle     Feb 10, 2018 in Business
A new market analysis report maps out how the top ten U.S. banks are investing in fintech. This is across categories like blockchain, insurance and lending.
The new report comes from CB Insights, titled "2017: Year in review and 2018 trends". The report focuses on changes to market conditions. Not so long ago the major banks were dominant; then came the fintech challenge from startups; and now the larger U.S. banks are buying up fintechs and incorporating many of the applications into their own systems, as part of their digital transformation initiatives.
Fintech for millennials
The main motivation for the major banks engaging with fintech startups is to maintain market share and customer base. Fintech apps appeal to the newer generation of banking customers, who expect multi-channel access and round-the-clock services — something very different to the banking model that was near-universally on offer only five years ago.
According to the report, a change in trend has been underway since 2012. In the past five years the top ten U.S. banks (as assessed in terms of total assets) have engaged in 81 deals with different fintech startups,. These arrangements total close to $4.1 billion in active funding.
In past year, this trend has intensified, with several banks realizing that the focus needs to be back on the consumer. Customers won't necessarily gravitate to the big banks any more; instead banks need to proactively attract new customers by offering niche products and services.
The new robotic, convenience-first face of banking
Examples of these technological innovations include banks beginning to back 'robot advisors'. A second example is with financial companies offering easy-to-use money management applications; these provide customers with real-time and 24-hour services. Specific cases cited by CB Insights include Goldman Sachs investing in Folio, a Japanese startup. Tokyo based Folio enables consumers to invest in different baskets of stocks, which based on packages, such as security companies or health organizations. The service is administrated via artificial intelligence. Goldman Sachs is also working with companies that operate through lending apps like Better Mortgage and Neyber.
Other cases include Citi and JP Morgan Chase, who have both invested in personal finance startups. These are Clarity Money and Dave. Both startup provide mobile platforms for money management. Citi holds 26 fintech firms in its portfolio, the most by any leading U.S. based banking operation.
Blockchain the next big step?
Banks are also becoming interested in blockchain. Here CB Insights analyzes that blockchain is set to transform finance. This embraces financial activities from payments transactions to private market investment. An example is with eliminating the of startups from relying on intermediaries to approve financial transactions.
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